Question

RCES Exercise 6-7 What would you pay for a $105,000 debenture bond that matures in 15 years and pays $5,250 a year in interest if you wanted to earn a yield of: Click here to view factor tables 2%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Amount to Pay Study $ 145475 3%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to o decimal places, e.g. 458,54 Amount to Pay su 130070 4%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) Amount to Pay

Answer 1

Ans 1 2 3 Face Value Interest Payment Market Interest Rate Period to maturity Amount To pay Yield 2% $1,05,000 $5,250 2.00% 15 $1,45,475 Yield 3% $1,05,000 $5,250 3.00% 15 $1,30,069 Yield 4% $1,05,000 $5,250 4.00% 15 $1,16,674 4 5 2.00% Yield 2% Market Rate 9% Yield 4% Face Value $1,05,000 $1,05,000 $1,05,000 Stated Rate (#) 5.00% 5.00% 5.00% Coupon Payment Annual Annual Annual Market Rate 3.00% 4.00% Maturity Period 15 15 15 Coupon payment frequency Annual Annual Annual Coupon Rate consider for calculation 5.00% 5.00% 5.00% Interest Payment $5,250 $5,250 $5,250 [$ 105000 x 5%] [$ 105000 x 5%] ($105000 x 5%] Market Rate Consider for Calculation 2.00% 3.00% 4.00% Period to maturity 15 15 15 Present Value of Coupon Payments Present Value of Annuity of $1 for period 15 12.84926 11.93794 11.11839 Present Value of Coupon Payments (A) $67,459 $62,674 $58,372 ($5250 x 12.84926] ($5250 x 11.93794] ($5250 x 11.11839] Present Value of Redeemed value Present Value of $1 for period 15 0.74301 0.64186 0.55526 Present Value of Maturity Value (B) $78,016 $67,395 $58,302 ($105000 x 0.74301] ($105000 x 0.64186] ($105000 x 0.55526] Present Value of Bond [(A) + (B)] $1,45,475 $1,30,0691 $1,16,674 $5250 (#) Interest Payment Interest Payment % ($5250/$105000]